2019 (2) TMI 1271 - AT - Income Tax

ITAT Pune grants deduction under section 54F for construction involvement. Importance of proper documentation for tax exemptions.

Varun Sunoy Saraswat Versus The Income Tax Officer, Ward 1 (1), Jalgaon

The ITAT Pune allowed the assessee's appeal, granting the deduction under section 54F of the Income-tax Act, 1961 for the assessment year 2011-12. The ... Disallowance of exemption u/s 54F - LTCG - construction of bungalow on the plot of land was in the name of mother - AO observed that, no exemption u/s 54F could be allowed to the assessee for the expenditure incurred on the construction of the bungalow - HELD THAT:- The perusal of documents filed by the assessee reflect that the Grampanchayat had issued permission for construction of the said plot of land in the name of assessee and his brother vide Certificate dated 10.12.2010. The assessee has entered into construction agreement with M/s. Nirmitee Construction dated 24.12.2010 and had invested the whole consideration. The said amounts were paid to the builder and the receipts of payments are available. The assessee has also filed approved construction plan at page 3 of Paper Book and which is in the name of assessee and his brother. Further, the completion certificate dated 11.03.2013 has also been issued by the Grampanchayat which is also in the name of assessee and his brother, wherein it is clearly mentioned that approval for house construction was given on 10.12.2010 and the construction was completed on 03.03.2012. In such facts and circumstances, there is merit in the claim of assessee that against the capital gains arising in his hands the assessee is entitled to claim the deduction on account of his share of construction of the said property as per provisions of section 54F of the Act. Thus the assessee is held to be entitled to claim deduction under section 54F - decided in favour of assessee. Issues:Denial of exemption under section 54F of the Income-tax Act, 1961.Analysis:The appeal pertains to the denial of exemption under section 54F of the Act by the CIT(A)-2, Nashik, for the assessment year 2011-12. The assessee contested the disallowance of exemption amounting to Rs. 18,10,498 under section 54F. The primary contention was the ownership of the bungalow constructed using the exemption claimed. The Assessing Officer noted discrepancies in the ownership transfer of the property, leading to the denial of the exemption. The CIT(A) upheld the Assessing Officer's decision, prompting the assessee to file an appeal before the ITAT Pune.The crux of the matter lies in the ownership of the property on which the bungalow was constructed. The assessee claimed that the bungalow was constructed using his funds and that he had ownership rights, despite the land being in the name of his mother. The ITAT Pune analyzed the documents provided by the assessee, including the construction agreement, payment receipts, approved construction plan, and completion certificate. These documents indicated the involvement of the assessee and his brother in the construction process, thereby supporting the claim for exemption under section 54F.The ITAT Pune distinguished previous cases where deductions under section 54F were denied due to lack of ownership or title in the property. In the present case, the ITAT Pune found merit in the assessee's claim based on the evidence presented, such as the construction agreement, payment receipts, and approval documents. The tribunal relied on precedents to support its decision, emphasizing the importance of establishing ownership or title in claiming deductions under section 54F.Ultimately, the ITAT Pune allowed the assessee's appeal, concluding that the assessee was entitled to claim the deduction under section 54F of the Act. The decision was based on the documented evidence provided by the assessee, which demonstrated his involvement in the construction of the bungalow despite the land being in his mother's name. The judgment highlights the significance of proper documentation and ownership proof when claiming exemptions under relevant tax provisions.In conclusion, the ITAT Pune's judgment favored the assessee, allowing the appeal and granting the deduction under section 54F of the Income-tax Act, 1961 for the assessment year 2011-12. The decision underscores the importance of substantiating ownership or title in properties when seeking tax exemptions, as evidenced by the detailed analysis of the documents and legal precedents in this case.